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on Network Economics |
| By: | Nicholas Economides (Stern School of Business, NYU) |
| Abstract: | This paper responds to arguments made in filings in the FCC’s broadband openness proceeding (GN Dkt. 09-191) and incorporates data made available since my January 14th filing in that proceeding. Newly available data confirm that there is limited competition in the broadband access marketplace. Contrary to some others’ arguments, wireless broadband access services are unlikely to act as effective economic substitutes for wireline broadband access services (whether offered by telephone companies or cable operators) and instead are likely to act as a complement. Nor will competition in the Internet backbone marketplace constrain broadband providers’ behavior in providing “last mile” broadband access services. The last mile, concentrated market structure, combined with high switching costs, provides last mile broadband network providers with the ability to engage in practices that will reduce social welfare in the absence of open broadband rules. Furthermore, the effect of open broadband rules on broadband provider revenues is likely to be small and can be either positive or negative. Unfortunately, various filings have misstated or mischaracterized the results on the economics of two-sided markets. Contrary to what some have argued, allowing broadband providers to charge third party content providers will not necessarily result in lower prices being charged to residential Internet subscribers. This is true under a robust set of assumptions. Despite some parties’ mischaracterization of the economic literature, price discrimination by broadband providers against third party applications and content providers will reduce societal welfare for numerous reasons. This reduction in societal welfare is especially acute when price discrimination is taken to the extreme of exclusive dealing between broadband providers and content providers. Antitrust and consumer protection laws are insufficient to protect societal welfare in the absence of open broadband rules. |
| Keywords: | Network Neutrality, Internet, Discrimination, Prioritization, Two-Sided Market, Market Power, Termination Fee, Broadband |
| JEL: | L1 D4 L12 L13 C63 D42 D43 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1002&r=net |
| By: | David Cuberes (Dpto. Fundamentos del Análisis Económico); Luis Andrés (World Bank); Tomás Serebrisky (World Bank); Mame Astou Diouf (International Monetary Fund - IMF) |
| Abstract: | This paper analyzes the process of Internet diffusion across the world using a panel of 214 countries during the period 1990-2004. Countries are classified as low and high-income and it is shown that the diffusion process is characterized by a different S-shape in each group. The estimated diffusion curves provide evidence of very slow "catching up". The paper also explores the determinants of Internet diffusion and shows that network effects are crucial to explain this process. One important finding is that the degree of competition in the provision of Internet contributes positively to its diffusion. |
| Keywords: | Technological diffusion, Internet, S-shape curve, Network externalities, Digital divide |
| JEL: | O14 O33 O57 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2010-07&r=net |
| By: | Szanyi, Miklós; Iwasaki, Ichiro; Csizmadia, Péter; Illéssy, Miklós; Makó, Csaba |
| Abstract: | In the epoch of globalization, small or medium-sized national companies have great difficulties in finding an appropriate place for themselves in global labor division systems. They most frequently apply either strategies that help them becoming part of global value chains as regular suppliers, or they try to locate in which they might cooperate with other small companies in industrial clusters to compete with larger multinational companies. In both cases, communication, knowledge transfer, and cooperative actions among companies are essential for improving competitive capacities. Since this type of cooperation relies heavily on close, regular contact and face-to-face interaction, the spatial concentration of actors can improve the chances for success. Literature on the topic of supplier networks and spillover effects, as well as that on industrial clusters, emphasizes the importance of a "critical mass" of companies and other organizations and institutions. The authors first define and describe the types of synergies that stem from co-location of cooperating market actors. In addition the potential linkages among the two types of networks, supplier chains and clusters are explained. After a brief overview of the related literature, the authors introduce a new, refined measurement method of spatial concentration with empirical survey results from Hungary. |
| Keywords: | industry cluster, supplier network, foreign direct investment, Hungary |
| JEL: | D24 F23 L14 L16 P23 R12 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:a539&r=net |
| By: | Franco Ruzzenenti; Diego Garlaschelli; Riccardo Basosi |
| Abstract: | In this review we establish various connections between complex networks, symmetry, and symmetry breaking. We first rephrase the main results of network theory in terms of symmetry concepts, then we study link reversal symmetry as a particular example, and finally consider the evolution of the international trade network as a real-world application. We show that a strong embedding in economic space breaks the invariance of the trade network down to disjoint equivalence classes, while the observed evolution of reciprocity is consistent with a symmetry breaking taking place in production space. Our results show that networks can be strongly affected by symmetry-breaking phenomena occurring in embedding spaces, and that network symmetries can therefore suggest, or rule out, possible underlying mechanisms. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1006.3923&r=net |
| By: | Chen, Maggie; Joshi, Sumit |
| Abstract: | The recent proliferation of free trade agreements (FTAs) has resulted in an increasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the participating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a significant fraction of FTA formations that would not otherwise be predicted by countries' economic characteristics. |
| Keywords: | free trade agreements; third-country effect; loss sharing; concession erosion |
| JEL: | F15 F11 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23507&r=net |
| By: | Alfonso Rosa García (Universidad de Murcia); Hubert Janos Kiss (Universidad Autónoma de Madrid); Ismael Rodríguez Lara (Universidad de Alicante) |
| Abstract: | We develop, both theoretically and experimentally, a stereotypical environment that allows for coordination breakdown, leading to a bank run. Three depositors are located at the nodes of a network and have to decide whether to keep their funds deposited or to withdraw. One of the depositors has immediate liquidity needs, whereas the other two depositors do not. Depositors act sequentially and observe others actions only if connected by the network. Theoretically, a link connecting the first two depositors to decide is sufficient to avoid a bank run. However, our experimental evidence shows that subjects¿ choice is not affected by the existence of the link per se. Instead, being observed and the particular action that is observed determine subjects¿ choice. Our results highlight the importance of initial decisions in the emergence of a bank run. In particular, Bayesian analysis reveals that subjects clearly depart from predicted behavior when observing a withdrawal. |
| Keywords: | bank runs, coordination failures, experimental evidence, networks |
| JEL: | C70 C90 D85 G21 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2009-25&r=net |
| By: | Marco van der Leij (Universidad de Alicante); Sanjeev Goyal (Department of Economics, Queen Mary) |
| Abstract: | This paper examines the celebrated "Strength of weak ties" theory of Granovetter(1973). We formalize the theory in terms of two hypotheses: one, for any threeplayers with two links present, the probability of a third link being present isincreasing in the strength of the two ties, and two, the removal of a weak tieincreases average distance in the network more than the removal of a strong tie. We test these hypotheses using data on the network of coauthorship amongeconomists. We find support for the hypothesis of transitivity of strong ties, but we reject thehypothesis that weak ties reduce distance more than strong ties do. We then identify two general features of networks which explain these findings:significant inequality in the distribution of connections across individuals andstronger ties among individuals who have more connections. |
| Keywords: | network; strength of weak ties; core-periphery; co-authorship network |
| JEL: | A14 D85 Z13 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2010-02&r=net |
| By: | Tsuru, Tsuyoshi; Owan, Hideo; Uehara, Katsuhito |
| Abstract: | Using personnel and transaction data obtained from two auto dealerships located in a large city in Canada, we examine whether same or different ethnic matches between salespersons and customers affect the prices and quantities of transactions. First, compared with White-White matches, we find little evidence of price discrimination for different ethnicity matches (such as White vs. Middle East), and we detect neither premium price setting nor discounting among same ethnicity matches (such as Asian vs. Asian) relative to different ethnicity matches. Regarding quantity, however, sales ratios to ethnically-same customers are substantially higher than is the case for ethnically dissimilar customers. For example, East Asian salespersons concluded more than 30% of their sales with East Asian customers. Moreover, we find that high-performing salespersons skillfully utilize social networks to conclude transactions with customers of the same ethnicity, especially when business conditions are unfavorable. This finding suggests that social networks are important to understanding the nature of auto retail markets. |
| JEL: | M12 M5 J15 J33 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:a529&r=net |